Mergers and acquisitions involving private equity firms in Brazil, a country long expected to be potential hotbed for buyout activity, has fallen sharply this year, according to figures from data provider Dealogic.

Brazil, which was the busiest emerging market for buyouts over the first nine months of 2010, has dropped to become only the ninth most active emerging market for financial sponsor M&A. There was just $414m of activity in the first nine months of this year, compared to $3.7bn for the same period last year.

However, while buyout activity in Brazil has declined, emerging market buyout activity globally rose to $15.1bn from $14.7bn in this period, boosted by growth in China, Hong Kong and Singapore.

China, the busiest emerging market, has seen $4.5bn worth of financial sponsor-related takeover activity in the first three quarters of 2011 outstrip the $3.5bn witnessed in the first three quarters of 2010.

Patrice Etlin, managing partner of Advent International in Latin America, based in São Paulo, said Brazil was going through a period of "adjustment" after several years of meteoric growth: "Buyout activity is slower, consumers are cooling on consumption, and the government is restricting credit. The [Brazilian] private equity market overheated over the last 18 months, and it is now adjusting."

However, he predicted buyout levels would increase next year: "I think 2012 will see a good level of activity, and at the end of this year, there will be firms with $10-$11bn in dry powder to do deals in Brazil."

Charles R Kaye, co-president of Warburg Pincus, said he remained confident deal activity would continue to flourish in emerging markets across the globe: "Private equity has been able to make a contribution to infrastructure development. The opportunities in these sectors are getting deeper and wider."